Women who are middle-aged or nearing retirement are likely to have smaller pensions than their male counterparts.

This is because they will have earned less, taken time off to raise children and faced discriminatory rates when buying an annuity to provide retirement income.

Some may get little or nothing because they have worked part-time or have until recently been kept out of their employer's pension scheme.

Changes to the law have improved things a little. It is now illegal for women to have a different "normal retirement age" from men in the same pension scheme. Women may resent waiting longer for their pension, but this gives those in occupational schemes more time to build up their funds.

The state retirement age for women is to be raised gradually from 60 to 65 between 2010 and 2020 to make it the same as men's. Females wanting to stop work earlier will have to save hard to bump up their private pensions until they qualify for the state ones.

Part-time workers, the vast majority of whom are women, gained the same employment rights as full-timers in 1998. And about 50,000 divorcees should benefit from pension splitting, which means that a couple's pension rights are part of a financial settlement. But there are still plenty of problems to watch out for:

Part-time pitfall

The 1998 reforms allowed part-time staff to join occupational pension schemes, but because they are likely to be earning a small income they need to check the terms of the scheme before joining.

Nearly half of final salary plans take into account any state pension a member is receiving when calculating the amount they will pay out.

So part-timers earning very little can end up with their entire final salary pension offset by state money.

Sizing up Serps

Employees may opt out of the state earnings related pension scheme (Serps), reclaiming that part of their national insurance contribution to invest in a private pension. The aim is to achieve a bigger fund than if you stayed in Serps.

As you get older, your contributions have less time to grow and the benefits of contracting out become more marginal, until you reach an age when it is better to contract back in. This is known as the pivotal age.

Women generally reach this sooner than men because of their earlier state retirement age. The pivotal age is also affected by your attitude to financial risk - women tend to be more conservative - and the charges of your chosen private plan. The higher the charges, the less likely the plan is to outperform Serps over a short time, and the earlier the pivotal age.

Many pension firms, however, have cut their charges since stakeholder pensions were introduced last April, says Kevin Minter of independent financial adviser David Aaron Partnership. And from 2020, the retirement age will be equal for both genders. Both changes make it better financially to contract out for longer.

Minter says: "Many companies are not quoting pivotal ages any more. Scottish Equitable has said there is virtually no case now for pivotal ages as charges have plummeted under stakeholder. With recent changes, virtually anybody should consider contracting out."

This particularly affects women who are self employed or do not belong to a company scheme. Most company schemes automatically arrange for their members to be contracted out.

Unfair annuities

You are required by law to use at least 75% of your money from an occupational or personal pension scheme to buy an annuity when you retire.

These pay an income until you die, but because women live longer than men, they pay more to get the same amount. A man of 65 with a £100,000 fund would be able to buy an annual income of £8,282, whereas a woman the same age could pay the same and receive only £7,559.

The government is under pressure to end the forced purchase of annuities and in his pre-Budget report, Chancellor Gordon Brown announced a review. In a High Court case next year, Cherie Booth QC, representing pensioner Joseph Singer, will argue that compulsion is unlawful.

If this case fails, a European Union directive, to be implemented by 2006, requires equal pension benefits so insurers will no longer be able to offer women lower rates. This in turn is likely to cut men's rates - a move that may end compulsion.

Meanwhile, new pensioners should find the highest-paying annuity they can, and not just take the one offered by their pension firm.

For more information contact Annuity Direct on 0500 506575, or the Annuity Bureau (0845 6026263).